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25 Agustus 2021

MNCN IJ - MNC Sekuritas Equity Report 25 August 2021

1H21 Financial Results: Everything is New Record High

Solid Performance in 1H21
• MNCN booked IDR4.86tn revenue in 1H21 which experienced double digit growth of +22.59% YoY (vs IDR3.97tn in 1H20). Advertisement becomes MNCN’s main revenue driven and continuing a magnificent growth of +27.09% YoY at IDR4.60tn in 1H21 (vs IDR3.62tn in 1H20). 
• Meanwhile, revenue stream on digital advertisement services grew significantly by 117.36% YoY equivalent to IDR889.19bn in 1H21 (vs IDR409.08bn in 1H20). Digital advertisement contributed 18.28% of total revenue and as the time goes by the contribution may increase in line with the digitalization on media sector.
• COGS increased by +35.44% YoY to IDR2.02tn in 1H21 (vs IDR1.49tn in 1H20), it was due to program and content expense. On the other hand MNCN booked IDR2.85tn gross profit which positively grew by +14.88% YoY (vs IDR2.48tn in 1H20).
• MNCN’s 1H21 net profit that attributed to parents company increased by +24.71% YoY to IDR1.19tn(vs IDR956.22bn in 1H20) implying 55% of FY21E target. Net profit margin rise to 24.52%, it was a good improvement than the previous years (vs 24.10% 1H20).

FTA Business Remain Strong
• Advertising revenue strongly increased by 47% YoY in 2Q21 to IDR2.66tn. Non-digital revenue continued to be the main contributor to the advertising segment, which rose by 31% YoY.

• RCTI’s prime time remains strong supported by its in-house drama production and special program line-up. As of Jul-2021, MNCN has managed to book an overall audience share of 53.4% on        prime-time and non-prime time audience share reached 40.8%, where RCTI dominated a significant share with 37.5% and 18.6% audience share, respectively.
• In terms of programming, MNCN has also been producing and broadcasting leading family-driven programs. As of Jul-2021, 24 out of 30 top programs from all genres are broadcasted out of MNCN FTA TV, including its signature drama series, 'Ikatan Cinta'. The management was very confident that the company will be able to continue robust performance of their FTA TV throughout the year.
• Some of the upcoming programs in 2H21 from RCTI will include Master Chef Indonesia, X Factor Indonesia, Dahsyatnya Award 2021, etc. Meanwhile, GTV will launch several music concert programs and E-sport Star Indonesia. Moreover, MNC TV will have the KDI 2021 program, Anugrah Dangdut Indonesia, AFC Cup and Mom & Kids Awards.

Capturing a Vibrant Digital Opportunity
• As the largest media company, MNCN seeks to optimize the online portal business line, which in 1H21 contributed 18.28% to total revenue. The entire MNCN online portal recorded 57mn MAU in  Jul-2021. Going forward, MNCN expects digital revenue to be able to contribute 50% in FY24E.

• Furthermore, MNCN tries to expand to enter the world of e-sports in Indonesia by collaborating with the leading online game developer Garena which has 4.68mn YouTube subscribers. As an initial step in the agreement, MNCN and Garena will produce the 4th season of the Free Fire Master League, which will be broadcast through their own platforms such as: 1) MNCN FTA TV; 2) GTV; and 3) RCTI+. All productions will be conducted at the MNCN studio complex and broadcast on August 21, 2021.
• As an illustration, Free Fire Indonesia has 8.9mn Instagram followers and the Free Fire Master League season 3 event recorded 13 episodes with a total of 8.30mn views via YouTube (as of August 12 2021). MNCN will also launch the mobile game "Rapid Fire" which will be launched in Sep-2021. Moreover, MNCN also plans to extend its collaboration with mobile game developer Moonton to organize season 2 of a talent search program called E-Sports Star Indonesia.

Valuation and Recommendation: NOT RATED
MNCN is currently traded at 5.77x PE, close to its –1STD (3-years average). However, MNCN is affiliated with the Company, so we do not offer any recommendation related to company prospects. Recommendation: NOT RATED.

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